Foxtel and Austar revealed the merger plans yesterday to coincide with Austar's annual general meeting. Foxtel, a joint venture between Telstra and Consolidated Media Holdings, said that if the merger goes ahead, it will create a new media titan in Australia, with over 2,500 full-time equivalent employees and anticipated revenues of $2.8 billion.

The news comes as Foxtel and Telstra have been deepening their ties over the past several years, with content from the pay TV operator's stable making its way onto Telstra's T-Box set-top box, as well as onto the company's mobile phones on its Next G network. Typically, to access the content customers need to be using Telstra's network services, although Foxtel has also opened up some content more broadly through its partnership with Microsoft's XBox platform.

In a statement issued late yesterday, Optus' general manager of regulatory affairs Andrew Sheridan said the proposed merger raised "significant competition concerns". "Specifically, it may have significant adverse implications for competition on the National Broadband Network (NBN) by strengthening Telstra's ability to exploit triple play services," he wrote.

Sheridan said that regulators internationally, for example, in the UK, had recognised such concerns and had taken to implementing regulations designed to open up access to premium pay TV content.

"This transaction opens the way for the ACCC to examine the clear and present risk that Telstra will use a content monopoly to lever a dominant position in high-speed broadband in the same way that it used its copper access monopoly to lever dominance in fixed-line voice services," Sheridan said. It's an issue that Optus chief Paul O'Sullivan has also previously raised as being a potential future problem.

However, not everybody feels the same way about the Austar/Foxtel deal.

Tim Renowden, an analyst covering the media and broadcast technology arena for Ovum, acknowledged in a statement yesterday that the spectre of reduced competition had been raised, but said that in reality the proposed deal would have little impact.

"Foxtel and Austar's customer bases are geographically distinct, meaning that pay TV customers don't currently get a choice of provider. A merger between the two would therefore make no practical difference to most consumers, and indeed may benefit households in Austar areas who would then be able to access the cheaper Foxtel on Xbox and Foxtel on T-Box services, which are currently off-limits to them," he said.

Renowden noted that Austar had already sold off its wireless spectrum in February this year to NBN Co, which meant that the deal would also have "little impact" on competition in the Australian telecommunications market.

"From a commercial and operational perspective, the proposed merger makes a great deal of sense for Foxtel and Austar," he said. "Such a move would provide opportunities to streamline subscriber acquisition, marketing and operational costs, and provide a unified national brand and content offering."